Restaurants Face Growing Pressure From Ready-to-Eat Meals

Working from home has become a fixture in the lives of many consumers and has resulted in consumers eating more meals at home. For nearly 100 million United States consumers, ready-to-eat meals provide the convenience and time savings they need, as many juggle long working hours, numerous daily video calls, cooking for their families and managing remote schooling. Restaurant takeout meals can satisfy the convenience and variety criteria that many consumers hold dear, but these meals can be expensive, especially with the added delivery service charges, tips and price markups from third-party apps.

PYMNTS’ data reveals why ready-to-eat meals appeal to consumers, the channels used to acquire them, and the features driving about 25 million consumers to buy them at least once a week. The time savings and convenience of ready-to-eat meals make them increasingly popular with cost-conscious consumers, who eat at home more frequently. But this potentially jeopardizes restaurant sales, as most consumers who opt for ready-to-eat meals are also restaurant patrons.

These are some of the findings and insights detailed in “Connected Dining: Ready-to-Eat Meals are Eating Restaurants’ Lunch,” a PYMNTS report based on a survey of 2,369 U.S. consumers conducted from April 6 to April 12. We collected information from consumers regarding their purchases of ready-to-eat meals, the frequency of buying them and how they obtained them. We also explored the reasons consumers cited for increasing their purchases of ready-to-eat meals in the last year and the potential for these meals to eat into restaurants’ market share.

This is what we learned.

More than 96 million consumers, many of whom are restaurant patrons, bought ready-to-eat meals in the past month. One-quarter buy these meals more than once a week.

The restaurant industry recently rebuilt itself, and drawing in new consumers and keeping existing customers is essential. Worries about inflation and the prospect of an economic downturn provide new challenges. The popularity of ready-to-eat meals, especially among consumers identified as restaurant patrons, is further adding to the challenges restaurants face.

According to PYMNTS’ data, 57% of consumers bought ready-to-eat meals in the last month. In addition, nearly half of consumers who bought ready-to-eat meals consumed them at least once a week. Prepared meals are more popular with Generation Z, millennials and the affluent because these meals appeal to their need for convenience and time savings. They appeal less to seniors and baby boomers, who may have more time to prepare meals.

A ready-to-eat meal purchase replaced a restaurant purchase in the last month for approximately one-third of consumers, with the young and wealthy more likely to make this substitution. Nearly 4 in 10 millennials and bridge millennials said their ready-to-eat meal purchase resulted from opting out of dining at a restaurant. A similar share of those annually earning more than $100,000 said the same. The number of consumers who eschewed restaurant dining closely matched those who purchased ready-to-eat meals at least once a week and those who reported increasing purchases of these meals in the last month compared to this time last year.

These findings correlate closely with the two most important reasons consumers choose prepared meals over restaurant meals: convenience and price. These two factors superseded taste and quality of customer service, which consumers cited as the most important factors when choosing restaurants. It is not unreasonable to expect, therefore, that the availability of more ready-to-eat meal options could further jeopardize restaurant dining.

Improved food quality and more options drove ready-to-eat meal consumers to increase their purchases.

Historically, consumers have not associated food quality with prepackaged food, yet nearly half of respondents thought the quality of ready-to-eat meals had improved. Twenty-five percent of all respondents cited better quality as the top reason they increased their consumption of ready-to-eat meals in the last month, relative to this time last year. Millennials and bridge millennials value quality the most.

Furthermore, millennials and bridge millennials have increased their purchase of ready-to-eat meals the most. Among the most important reasons cited by these respondents for increasing purchases of ready-to-eat meals were a rise in the available options and the convenience of requiring less time to prepare their food. This sentiment suggests that a winning growth strategy for prepared meal providers is to add variety and options while maintaining high quality.

Not all demographics are increasing their purchases of these meals, however. We found that 63% of baby boomers and seniors reported that their purchases of these meals remained steady in the last month compared to one year ago. Gen Z consumers reportedly decreased their purchases and consumption of prepared meals, suggesting a more pragmatic approach to money and spending.

Nearly two-thirds of consumers who purchased ready-to-eat meals purchased their most recent ones at a grocery store.

Where consumers buy prepared meals and whether they are delivered may also provide insights into channel marketing strategies for manufacturers. Our research finds that 65% of consumers bought ready-to-eat meals from grocery stores, with baby boomers and seniors and those annually earning less than $50,000 more likely to buy these meals from grocery stores than the average consumer.

While all consumers primarily purchase prepared meals from grocery stores, delivery is a popular second choice among several groups. Bridge millennials, the second-most frequent consumers of ready-to-eat meals of any age group, were the most likely to have these meals delivered, with 29% opting for delivery. Additionally, 22% of those annually earning more than $100,000 had meals delivered, the highest share of any income bracket.

Grocery retailers can attract shoppers by offering high-quality, ready-to-eat meals in-store and online. Offering prepared meal combinations with options for side dishes, appetizers or desserts could be a strategy to upsell ready-to-eat meal buyers. Furthermore, prepared meal providers could offer premium meals to consumers using subscription and delivery services.

More consumers who bought ready-to-eat meals in the past month used aggregators and were likelier to believe technology improves dining experiences.

Our data shows that 51% of respondents who bought ready-to-eat meals in the last month used aggregators such as DoorDash, Uber Eats or Grubhub. Previous PYMNTS’ research found that younger consumers and high-wage earners are more likely to use aggregators for their restaurant takeout purchases than average, with the former group also being known for their inclination to use technology to shop. We also found 46% of ready-to-eat meal purchasers surveyed believe that the more technology restaurants use, the better the customer service.

The fact that aggregator platforms are expensive has contributed to their limited use among consumers overall, although their dedicated user base has increased usage. The use of aggregators by consumers buying ready-to-eat meals suggests that these consumers may be willing to pay a premium for convenience and time savings. Restaurants may seek to lure customers away from aggregators by developing first-party applications. Grocery stores and prepared meal subscription services may view direct delivery as a strategy to attract new consumers.

Conclusion

Ready-to-eat meals appeal to a wide range of demographic groups for different reasons, and one upshot of their rising popularity is that they may replace restaurant meals. Consumers who increased their prepared meal purchases said the quality and variety of options have improved, which could make restaurant meals an even less attractive offering. The most frequent consumers of ready-to-eat meals were the most likely to have their meals delivered: Consumers annually earning more than $100,000 were approximately 5 percentage points more likely than the average consumer to opt for delivery. Bridge millennials were 12 percentage points more likely to get these meals through delivery.

For ready-to-eat meal subscription providers, this suggests options to add variety to their offerings while giving restaurants pause for thought on how to better compete for lost sales.

Methodology

“Connected Dining: Ready-to-Eat Meals are Eating Restaurants’ Lunch,” a PYMNTS-exclusive report, is based on a survey of 2,369 U.S. consumers conducted from April 6 to April 12. We collected information from customers regarding their purchase of ready-to-eat meals, the frequency with which they bought them and how they procured them. We also explored the reasons consumers cited for increasing their purchases of ready-to-eat meals over the last year and the potential for these meals to eat into restaurants’ market share.

“Connected Dining: Ready-to-Eat Meals are Eating Restaurants’ Lunch,” is the most recent installment of PYMNTS’ “Connected Dining” series. For more, read the previous edition, “Connected Dining: Third-Party Restaurant Aggregators Keep the Young and Affluent Engaged.”